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Tuesday, March 15, 2016

Despite appearances to the contrary, this year’s presidential follies have managed to feature at least a few policy discussions amid all the name-calling.
Income inequality in particular has animated voters on both sides of the partisan divide, but the solutions advocated by candidates from each party are markedly different.
Democrats claim higher taxes on the rich and more benefits for the poor are the best ways to reduce inequality...
...To be clear, spending power remains extremely unequal.
Our point is that the fiscal system, taken as a whole, does materially reduce inequality, not in what people own or earn, but in what they get to spend.
This limits the scope to further equalize spending power by taxing the top 1 percent at a much higher rate. Indeed, among 40-49 year-olds, confiscating all the remaining spending power of the top 1 percent (with a 100 percent tax rate) and giving it to the poorest 20 percent would leave the latter group with 16.1 of total spending power...
...Another key finding is that U.S. fiscal policy acts as a serious disincentive to work longer hours or harder for more pay...
...The facts revealed in our study should change views. Inequality, properly measured, is extremely high, but is far lower than generally believed. The reason is that our fiscal system, properly measured, is highly progressive. And, via our high marginal taxes, we are providing significant incentives to Americans to work less and earn less than they might otherwise...
...As candidates and voters debate inequality and the best ways to reduce it, it’s important to start with the actual facts. That will make it far easier to figure out which policies, if any, should be changed going forward.
Raising taxes and benefits as Democrats advocate will...